Bulls Buy Call Spreads on Weatherford (WFT)

WFT – Weatherford International Ltd. – Shares of the provider of equipment and services used for the drilling, completion and production of oil and natural gas wells increased as much as 6.50% during the session to secure an intraday high of $16.04. Weatherford’s shares are currently up 3.80% to stand at $15.63 as of 2:20 pm (ET). Options on the oil services firm are trading most heavily in the August contract following second-quarter earnings released this morning. Weatherford reported earnings of $0.11 per share, excluding certain items, which exceeded average analyst expectations of $0.07 a share. Notable call buying took place in the August contract, but one bullish player with a longer-term optimistic view of WFT purchased a plain-vanilla debit call spread in the November contract. The trader picked up 2,000 calls at the November $16 strike for an average premium of $1.42 each, and sold the same number of calls at the higher November $19 strike for $0.40 in premium apiece. Net premium paid to initiate the transaction amounts to $1.02 per contract. The call spreader is prepared to make money as long as Weatherford’s shares rally 8.9% over the current price of $15.63 to surpass the average breakeven point at $17.02 by expiration day. Maximum potential profits of $1.98 per contract are available to the bullish trader should shares of the underlying stock surge 21.5% in the next several months to November expiration.

Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.

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